Feb 12, 2007

New York State Disclosure Law: Raising the Bar

It's been over a month since the new New York State agency disclosure law. The new law clearly defines the relationship between broker buyer and seller. The new disclosure form is required for 1-4 family houses.

The form is not required for coop and condo apartments, but the relationship between the broker and consumer must be disclosed. While it is not required, I have been using it. Savvy buyers are asking who I represent.

While I've been working with buyers since I started my real estate career, technically I wasn't a buyer's agent unless the buyer signed a buyer's agreement. Now I am a buyer's agent by simply disclosing my fiduciary duty to the buyer. I am all for transparency and this is another positive step in educating the consumer about the real estate purchase process.

I have always worked hard for buyers, developed relationships, negotiated on their behalf, furnished them with comps, strategized bidding, prepared board packages, helped secure financing and many of the responsibilities of a buyer's broker but under state law I represented the seller.

REBNY the real estate board of New York has rules that many brokers follow. If REBNY members bring a buyer to another broker's listing they therefore represent the buyer. This rule contradicted the prior state law, now the REBNY rule is acknowledged by the state as long as the broker discusses their relationship with the buyer.

Many agents in Manhattan seem confused by the new disclosure. Manhattan real estate has always been an anomaly. Practices were accepted because that's how they've always been done. Many agents think a buyer's agent has to be an exclusive buyer's agent or the buyer has to pay the commission or there needs to be a contract in order to be a buyer's agent

When working with buyers I am a buyer's broker with my fiduciary to the buyer unless it is my own exclusive listing or my broker's exclusive listing then my fiduciary is to the seller or a dual agency.

Below is description from Department of State and links for forms:

New Agency Disclosure Requirements for New York State:
Prior to the revisions to Section 443 of the Real Property Law, only one agency relationship disclosure form was required for buyer/seller and landlord/tenant transactions. The combined form used the terms "seller/landlord" and"buyer/tenant" interchangeably. On and after January 1, 2007, the combined form will no longer be permitted and, rather, two separate disclosure forms will be required; one for seller/buyer transactions and another for landlord/tenant transactions. The two forms provide expanded, clearer definitions of the different agency relationships and explain the fiduciary duties owed by brokers and salespeople under each type of agency relationship.

The revised statute also defines dual agency. While the concept of dual agency is not new, Real Property Law, Section 443 now provides a clear definition of this type of agency relationship. A dual agent is defined by the revised statute as, "an agent who is acting as a buyer's agent and a seller's agent in the same transaction."

The revised statute also adds a definition for "designated sales associate." A designated sales associate is defined by the statute as: " a licensed real estate salesman or associate broker, working under the supervision of a real estate broker, who has been assigned to represent a client when a different client is also represented by such real estate broker in the same transaction."

Essentially, a broker who is acting as a dual agent will be permitted to appoint two different real estate salespersons and/or associate brokers to represent each party to the transaction. The representative broker is still required to provide supervision to the designated sales associates. For this reason, and as in a pure dual agency situation, when designated sales associates are appointed, the consumers are not afforded all of the fiduciary duties inherent in a single agency arrangement. Specifically, the designated sales associate and representative broker cannot provide the fiduciary duty of undivided loyalty. The new agency disclosure form contains a disclaimer to this fact.

The link to these two disclosure forms is at http://www.dos.state.ny.us/lcns/realest.html#disclosure. In accordance with statute, each is required to be printed on a one page, two-sided form.


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